An Introduction To Index Trading
Index Trading is simple, the term 'Index Trade' refers to a trade that
can be placed whether a particular Stock Market Index moves up or down over any specified (short-term) time period. You never actually own the instrument you are investing in, you are simply taking a 'position' on a particular Index to move in one specified direction, either 'UP or DOWN'. There are many global Stock Market Indices, some examples include: XJO (Australian Stock Exchange - ASX 200); FTSE (London - UK Stock Exchange - FTSE100); CAC (Paris - French Stock Exchange - CAC40); INDU (US Stock Exchange NYSE - Dow Jones Industrials Average - DJIA30).
Share Trading and Index Trading are often incorrectly thought to be the same thing. The terms 'Share Trading' and 'Index Trading' are never to be used interchangeably, although they both utilize the same Stock Market Indices, they are two entirely different trading systems. The trading process in Index Trading is based on taking a position on which way an overall market will move in a relatively short time frame, requiring minimal investment, and minimal risk by the trader, in comparison to Share Trading which requires substantial investment and risk and does not usually provide profits for long indefinite periods of time, normally months or years.
In Index Trading, you are effectively making a 'stock market wager', or a 'bet' on the market rather than trading securities, as you do not physically own your investment. In a lot of countries all profits generated are classed as windfalls and are therefore not declarable as part of your normal income. With tax-free returns and minimal risk, this style of trading has proven to be an exciting and profitable opportunity for many people worldwide. Index Trading requires minimal time input which makes it very attractive to those who work full-time and have very little time to spare, yet need to increase their overall income.
Each trade is done using only a small portion of your trading account, usually only a couple of hundred dollars or so. However, in cases where you only have a small trading account due to limited funds, the trade (or bet) can be even lower. On the other hand, if you have a large trading account and wish to invest more in order to gain more profits, you can certainly do that as well. This makes Index Trading suitable for a wide array of investors, depending on individual budgets.
The actual trading process is very simple. However, the specific Market analysis that must be carried out before any trading can occur is generally too complex for most people to undertake. Therefore, in order to take advantage of this type of low-risk profit generating it is imperative to join a reputable company specialising in Index Trading as they constantly analyse the fluctuation of major international Stock Market Indices, and are able to select a safe period for the trade (or bet) to occur for you. One of the biggest advantages of Index Trading is the fact that you always remain in total control of your own trading account and you're able to utilize your funds at any time. The greatest benefit of Index Trading is that it offers exceptional short-term returns, with minimal risk and minimal investment.
by: Peter Jensen
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